Monday, January 21, 2013

“LBJ, Jr.” and Assailing the Big Banks!

Wily Fox or Same-o, Same-o??

Joe Califano, former White House assistant to President Lyndon B. Johnson, told me that in 1969, when Johnson wanted to reduce the federal budget request to below $200 Billion because he felt the zeroes would shock the public, and asked Califano to come up with budget cuts to achieve his political goal.

Knowing the Congress, LBJ and his staff agreed that their final list of 26 initiatives list had to have one “stinkeroo” which the Congress would oppose and insist on saving and “reluctantly,” LBJ would fight but then give in order to win out on the other 25.

That “stinkeroo,” according to JC, was kicking Fannie out of the government. But, Johnson’s team was shocked when the Congress accepted all of the proposals and which is how Fannie Mae then got “privatized” in 1970.

Has President Obama turned into Lyndon Johnson, a calculating schemer and who could cajole, steamroll, or confound his legislative opponents depending on the matter?

President Obama facing major budget and fiscal battles with the Republicans, including entitlement cuts, tax and immigration reform, and major foreign policy challenges, last week threw a football into a hornet’s nest, offering more than 20 legislative and regulatory proposals to tighten existing guns laws and make it more difficult to produce and sell to the public military style firearms and large capacity magazines.

The Right—responding to the Obama gun control agenda--has gone cationic with its distorted “threat to the Second Amendment” allegations, other extreme statements, vows, curses, warnings, threats, and bilious frippery about conspiracy theories.

There will be more.

But, Obama hasn’t talked about anything dramatic, save some greater/deeper background checks and controls, which a significant majority of Americans could support.

He has not proposed confiscating existing civilian owned military type weapons or their big mags. But that hasn’t stopped the GOP political noise machine, as well as the National Rifle Association, from churning out breathless calls seeking opposition to Obama and naturally for money. (I’ve gotten the calls, a legacy of having given to a few Republicans when I was a lobbyist.)

But as the “Gunnies” get apoplectic over this matter and rant all year--or “Reince Priebus” all year (sorry, I think his name is a little strange)--can Obama stealthily move in behind his registration plan and capture victories on the more substantive fiscal and economic matters?

I hope so.

How many fights can the GOP simultaneously wage, especially when they stand to look out of step with the nation opposing heftier weapons purchase background checks and other common sense things?

After Newtown, I wouldn’t label any federal or state government action as misapplied, but Obama could be ahead of us all and using his “gun fight with the GOP’s no-way Chorale” a bit like LBJ’s employed his Fannie Mae stinkeroo?

Too Big to Survive Without Major Changes?

I vacillate on the work of Gretchen Morgenson, the New York Times big hitter financial columnist, she of the Sunday Business Section front page left hand space.

On the one hand she produced a poorly researched anti-Fannie Mae book—based on a lot of specious work by the AEI’s Peter Wallison and Ed Pinto—blaming Jim Johnson, Fannie Mae’s Chairman and CEO, then, for what she/they claimed was the company buying poorly underwritten near subprime quality loans for much of the 1990’s.

The problem with her book was that her primary premise wasn’t true and the AEI and her books sales suffered when a number of serious observers pointed out that Fannie had minuscule mortgage losses in that decade and well into the next.

Since then, I think Ms. Morgenson has risen about that crappy work and her columns, at least, have focused on some serious issues facing the nation—and the Congress—including the overwhelming power of the country’s largest commercials banks, which--despite anything in the Dodd-Frank legislation--remain “Too Big To Fail” (TBTF).

Her much read Sunday column this past week highlighted a Washington speech from the President of the Dallas Federal Reserve Bank, Dick Fisher, who called for breaking up the biggest bank holding companies into smaller pieces which--if overtaken by failure--would not require a prompt federal bailout, which is the case right now.

Bravo Ms. Morgenson for highlighting the speech and the enigmatic Dick Fisher for shining the light on this prominent issue.

One of the benefits of the Fisher idea is that it would produce much more competition among lending institutions, as smaller institutions get access to markets and money the big banks now dominate.

One would think the GOP would warm to this objective, but—as the record shows—they might risk giving up a ton of large bank political cash if Jeb Hensarling (R-Texas), ironically whose district includes Dallas--and his Committee took on repair of this real structural issue rather than braying about Fannie Mae (a far lesser systemic problem which could solve itself).

As is becoming quite common these days, Ritholz nailed the AEI’s Ed Pinto for some of his gratuitous statements about the Federal Housing Administration (FHA).

As noted above and also in my last blog, Ed has spent a few years attacking Fannie Mae and the FHA.

Now people, who know better about the causes of the 2007 financial breakdown and the very shoddy mortgage underwriting which contributed to the dislocation, are beginning to turn the tables on Ed and his fellow travelers.

Jesse Eisenger, who writes for Propublica, had a column in the New York Times also challenging Pinto’s opposition to the federal government’s mortgage finance role.